January turned out to be highly volatile for equity as well as cryptocurrency investors. Where the benchmark BSE Sensex retreated over 975 points on a month-to-date basis till January 27, popular cryptocurrency Bitcoin also tanked nearly 20 per cent to Rs 27.66 lakh during the same period.
Business Today caught up with market veteran Shankar Sharma, vice-chairman and joint managing director at First Global, to understand which is the better place to be in 2022. Edited excerpts.
Business Today (BT): In which pockets you have cut positions amid the ongoing uncertainty in the equity market and why?
Shankar Sharma: I cut back some positions in the small and micro-cap segments because the speculation was high. Several micro-cap stocks are running up every single day and the level of froth is immense in the equity market.
BT: Volatility ruled the roost in the domestic equity market in January. How do you see the trend going ahead?
Sharma: This ongoing year is going to be a tricky one as compared with 2021 and 2020. Usually, after 2-3 strong years you have a down year going by the long-term statistics. However, there will be many opportunities to make money because there are several small companies that are doing very well in India. On a broader index basis, I would see the returns being muted this year.
BT: Small-cap, midcap or large-cap: Which is the better place to be in 2022?
Sharma: I am extremely optimistic about small-cap segment in India because I see so many companies doing phenomenally well where valuations are reasonable. I do believe that is the area to focus on this year as well instead of looking at the big cap stocks.
BT: Some of the investors are stuck with the brutal sell-off in newly-listed firms post their listing. What is your advice to such investors?
Sharma: If you are referring to the so-called new generation companies then the reality is that there is no valuation support for these companies and they can fall a lot more before they stabilise. If you look at the trend for such companies worldwide there has been absolute and total carnage with so many stocks falling 80-90 per cent in the last 12 months. I see no reason why this new generation of companies will sustain their current valuations.
BT: Which pockets or themes are looking attractive to you right now?
Sharma: I remain very optimistic about technology stocks in India as well as chemicals.
BT: As you are a global investor, where are you investing right now?
Sharma: India remains a favourite market for this year and most of my capital right now is allocated towards India and less towards other markets.
BT: Do you follow cryptocurrencies? Will they sustain and continue to create wealth?
Sharma: One should be very careful while taking exposure to cryptocurrencies. Investors should not have more than 5 per cent of their capital invested in crypto assets.
BT: Which are the top risks for the Indian and global markets right now?
Sharma: Strong oil prices and strong commodity prices are the biggest risks for markets because that will lead to a tightening of monetary policy therefore inflation is a serious problem right now.
BT: Portfolio management services (PMS) are for high net-worth investors. How small investors can benefit from your wisdom? Are you planning to bring any product for them?
Sharma: Yes, in fact as we speak, we are working on a few very interesting products for retail investors which we shall be launching in the next few weeks and months.
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